Lesser-known tax “extender” rules reveal savings

The “extender” tax legislation passed in December made permanent many well publicized tax deductions. But a peek under the hood reveals some lesser-known changes that could impact your taxes.

Payroll penalties. Beginning in 2017, small errors (generally $100 or less) on information returns such as Forms W-2 and 1099 will not trigger an automatic penalty. However, the law also reduces the time you have to file certain Forms 1099 and W-2 with the IRS and the Social Security Administration. Beginning with 2016 forms – the ones you’ll file in January 2017 for 2016 payments – these returns are due January 31, the same date a copy is due to employees or other payees. The new due date applies to both paper and electronically filed 2016 Forms W-2 and W-3 and Forms 1099-MISC that report nonemployee compensation in box 7. The due dates for other information returns are not affected.

ABLE account changes. ABLE accounts – named for the Achieving a Better Life Experience Act that created them – are tax-beneficial savings accounts for qualified disabled individuals. The extender legislation eased the requirement that you had to open the account in the beneficiary’s state of residence. Now you are free to open an ABLE account with any state program you choose.

Residential energy credit. You can claim a 10% energy credit for qualified improvements (up to a lifetime maximum of $500) when you improve your home with insulation, windows, and certain roofs. The credit is available for 2015 and 2016.

Commercial building energy deduction. The above-the-line deduction for energy efficiency improve-
ments to lighting, heating, cooling, ventilation, and hot water systems in your commercial building is available for 2015 and 2016.

“Cadillac” health plans. The 40% Affordable Care Act excise tax on high-
dollar “Cadillac” health plans has been post- poned until 2020.

Straight-line depre – ciation for certain qualified assets. You can continue to benefit from the 15-year straight-line deprecia-
tion deduction for qualified leasehold, restaurant, and retail improvements.

For more information about other extended tax breaks, please contact our office.